Gold miner Newcrest fined $1.2 million for market disclosure breaches

Australia's largest gold miner Newcrest has agreed to fines totalling $1.2 million after admitting to concealing sensitive financial information from its shareholders.

The Australian Securities and Investments Commission alleged Newcrest gave a select group of analysts a series of market sensitive briefings about changes in gold production forecasts and spending plans in May 2013.

Newcrest's share price fell dramatically in the days before it confirmed the write downs to the broader market.

In a settlement with the corporate regulator, the company confirmed it selectively briefed analysts on gold production and capital expenditure before publicly releasing the figures.

Corporate law specialists believe the admission will strengthen a class action launched by shareholders in December.

In its submission the Federal Court, ASIC said Newcrest was obliged to disclose the information to the Australian Stock Exchange once it was known to be market sensitive.

ASIC said the contraventions of the continuous disclosure rules continued until June 7, 2013 when Newcrest finally informed the market about expected write downs and changes in gold production and capital expenditure.

The court documents showed records of emails, meetings and telephone conversations between executives and several global investment banks in which the forecasts were discussed in the weeks ahead of the public announcement.

In a joint submission to the court, Newcrest and ASIC agreed on a $800,000 fine for the first contravention relating to gold production, and $400,000 for the second contravention relating to capital expenditure.

The maximum penalty for companies failing to make timely disclosures to the market is $1 million per contravention.

Newcrest 'regrets' disclosure contraventions

Newcrest said ASIC had not alleged the company had knowingly or intentionally contravened its continuous disclosure obligations.

In a statement, Newcrest chairman Peter Hay said: "Newcrest takes its disclosure obligations very seriously and sincerely regrets the contraventions".

Mr Hay said following an internal review the company has made changes to enhance its investor relations policies and procedures.

Following the settlement ASIC Commissioner, Cathie Armour said, "Companies should have regard to existing guidance in the market about how to conduct briefings to ensure confidential, market-sensitive information is not selectively disclosed".

Ian Ramsay from Melbourne University's Centre for Corporate Law and Securities Regulation says Newcrest's admission that it broke Australia's continuous disclosure rules is something of a rare sight.

"Quite often we see settlements where there isn't any acknowledgement of wrongdoing by the party concerned," he said.

"But it's very clear from what we've seen this morning that Newcrest has admitted the breaches and the contraventions of the continuous disclosure laws that were alleged by ASIC."

"It's also useful to note that Newcrest fully cooperated with ASIC," he said.

"Our continuous disclosure laws are very important to the integrity of our markets. In other words, companies should not be able to selectively brief analysts or selectively brief anyone and therefore give them an informational advantage."

The settlement is now awaiting judgement in the Federal Court.

Shareholders likely to welcome settlement

While both parties have agreed that Newcrest did not intentionally break the continuous disclosure rules, the settlement says the selective analyst briefings did put other shareholders at a disadvantage.

And Professor Ramsay says that has implications for a shareholder class action law suit lodged by the firm Slater and Gordon last year.

"My thinking is that the level of detail in the documents today, I imagine the class action lawyers would find very helpful," he said.

Stephen Mayne from the Australian Shareholders Association agrees.

"The class action that's on foot will almost certainly settle, as every other class action in Australia has," he said.

Mr Mayne says Newcrest shareholders will be glad to see the company's settlement with ASIC.

"We've seen changes on the Newcrest board, a new chairman and a new CEO. So there have been some changes at the top.

"By making all these public admissions as well, they strengthen the hand of the class action proponents, so presumably that settlement will follow and the company can get on with being one of the world's biggest gold miners."

And Stephen Mayne sees a lesson for other executives in this long-running episode.

"As soon as you're aware that there may be some new information, or a deterioration in your position, suspend your stock and tell everyone.

"Don’t just tell a few analysts. Don’t delay telling people. Just get it out early."